BLBG:Pound Snaps Seven-Day Drop Versus Euro on Greek Creditor Concern
The pound advanced against the euro, ending the longest run of declines in almost three years, as a meeting of euro-area finance ministers yesterday failed to decide on a way to tackle Greece’s debt crisis.
Sterling dropped to the lowest level in four weeks versus the dollar after the International Monetary Fund lowered its economic outlook for the U.K. and as data showed manufacturing declined more than economists forecast in August. Ten-year gilts slipped as the Debt Management Office sold 1.75 billion pounds ($2.8 billion) of securities due in June 2032.
“Greece and its creditors have yet to reach a compromise,” said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London. “This has caused investors to lose confidence and sell the euro against the dollar, meaning it has also fallen against the pound.”
The U.K. currency strengthened 0.2 percent to 80.74 pence per euro as of 11:24 a.m. London time. It had weakened for seven days, the longest run of declines since the period ending Nov. 26, 2009. Sterling slid less than 0.1 percent to $1.6021, after falling to $1.6002, the lowest level since Sept. 11.
IMF Outlook
The U.K. economy will contract 0.4 percent this year before expanding 1.1 percent in 2013, the IMF said in its World Economic Outlook today. It previously projected growth of 0.2 percent and 1.4 percent in those years.
The 17-country euro area economy will shrink 0.4 percent this year and grow 0.2 percent in 2013, less than the 0.7 percent predicted three months ago, the Washington-based lender said.
U.K. factory output dropped 1.1 percent from July, when it rose 3.1 percent, the Office for National Statistics said today in London. The median forecast of 25 economists in a Bloomberg News survey was for a decline of 0.7 percent. Total industrial output declined 0.5 percent, matching economists’ forecasts.
The pound has strengthened 0.6 percent in the past six months, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The euro fell 1.8 percent and the dollar weakened 0.3 percent.
The 10-year gilt yield added one basis point, or 0.01 percentage point, to 1.74 percent. The 1.75 percent bond due September 2022 fell 0.11, or 1.10 pounds per 1,000-pound face amount, to 100.06.
The U.K. sold the 2032 gilts at an average yield of 2.661 percent, compared with 3.015 percent at a similar sale on April 12. Investors bid for 2.12 times the amount of securities allotted, up from 1.39 times at the previous auction.
Gilts returned 3 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bonds gained 3.1 percent and U.S. Treasuries rose 1.8 percent.
To contact the reporter on this story: David Goodman in London at dgoodman28@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
